Having bad and/or inaccurate things said about you is a fact of life at the top of any given industry, and as Jay-Z advises, it’s often best to brush that dirt off your shoulder and move on.

But for Blackberry-maker Research In Motion, a recent note crossed the line. The company announced today it would file complaints with market regulators in the U.S. and Canada over a note sent out by analysts at Detwiler Fenton. But what, exactly, can the SEC do about a research report that a company is complaining about?

The note in question said that the flagship new BlackBerry Z10 is being sent back by dissatisfied customers in droves. Key paragraph here:

We believe key retail partners have seen a significant increase in Z10 returns to the point where, in several cases, returns are now exceeding sales, a phenomenon we have never seen before. Verizon (VZ) launched the phone on March 28 so we are approaching the expiration of the 14 day grace period for initial buyers while AT&T (T) has been selling the Z10 for three weeks. It appears the biggest customer complaints are the unintuitive nature of the user interface, the maps app, and the lack of apps – issues that become apparent once consumers have had several days to use the device.

That, along with a flurry of other negative research reports this week, has taken its toll on RIM stock, down 9% since Monday. But the company says that while criticism is OK, “when false statements of material fact are deliberately purveyed for the purpose of influencing the markets a red line has been crossed.”

BlackBerry, a world leader in mobile communications, today said it would seek Securities and Exchange Commission and Ontario Securities Commission review of a false and misleading report about retail return rates for the Company’s new BlackBerry Z10 smartphone.

“Sales of the BlackBerry® Z10 are meeting expectations and the data we have collected from our retail and carrier partners demonstrates that customers are satisfied with their devices,” said BlackBerry President and CEO Thorsten Heins. “Return rate statistics show that we are at or below our forecasts and right in line with the industry. To suggest otherwise is either a gross misreading of the data or a willful manipulation. Such a conclusion is absolutely without basis and BlackBerry will not leave it unchallenged.”

RIM said it will submit formal complaints to regulators in the coming days.

But what can the company complain about? Free speech issues make it tough for regulators to police the opinions of market analysts, even if they turn out to be grievously wrong. But SEC rules forbid market manipulation, defined as “intentional conduct designed to deceive investors by controlling or artificially affecting the market for a security.”

That includes “spreading false or misleading information about a company”, which might be what RIM is claiming this research note did (RIM declined a request for comment). The SEC has a portal where anybody can file a so-called TCR (Tips, Complaints and Referrals) notice against anybody else they accuse of breaching market rules.

But again, the bar here is pretty high: RIM would need to prove the analysts were not just ill-informed, but intentionally trying to trick investors. For its part, Detwiler Fenton has said it is “confident in our research methodology and we welcome any regulatory inquiry.”

The libel suit seems to have been based on shaky grounds regardless of the underlying merits of the report. Audit Integrity’s report was an expression of opinion based on publicly available research material, and as such would normally be protected under the First Amendment. In addition, the lawsuit would have enabled lawyers for Audit Integrity to question Hertz under oath during discovery. This could have been an excruciating and unpleasant experience indeed for Hertz. In addition, Hertz’s profitable third quarter may have allayed some investor fears; finally, as part of a public relations battle against Audit Integrity’s research, the suit may have been successful, even if it was never seriously intended to be fought out in court.

Comments (5 of 8)

The supposed "analyst' is a penny stock who's stock price is 10 cents and all of 70 (seventy) shares traded yesterday. So, who would listen to a report like that and actively trade BBRY? Answer: AAPL shareholders who are gnashing their teeth and lashing out at everyone because, what happened to those lofty targets of $1,111.11 and revised target of $888.88 for AAPL? Apple shareholders were all giddy, exclaiming joyously as Apple climbed from $650 to $703 but they forgot one thing. When some goofball comes out with an analysis that puts a stock over $1,111 based of a TV, the smart money has already gotten out.

10:34 am April 16, 2013

vestor wrote:

to the "" who wrote this article, I'm glad you base your opinion on jay z quotes. except a DF report isnt just bad publicity, it hurts alot of investors and and short term option traders. losing money based on lies is something the sec should be concerned about.

chris brown says he can live twice!, so, why dont u follow him and jump off a cliff

3:11 pm April 13, 2013

yogikeung wrote:

"Having bad and/or inaccurate things said about you is a fact of life at the top of any given industry, and as Jay-Z advises, it’s often best to brush that dirt off your shoulder and move on."

So, just wondering, do you agree with Jay-Z?

7:45 am April 13, 2013

respighifan wrote:

Well detwiler-fenton, - nice smear job. The fact they say they are "confident" in their research means zero.
Zero, by the way, is the moral integrity of D-F analysts and just about any other analyst out there. Do not trust them with anything or anyone and you will be far better off.

1:46 am April 13, 2013

Douglas6 wrote:

If RIM thinks that it has been libeled by these analysts, it can sue them for damages. The SEC has no role of any kind to play in this dispute.